We’ve seen a lot of innovation in payment initiation over the last few years. Apple Pay, Android Pay, Walmart Pay and their like have filled Payments News headline stories. But this year, at Money20/20, consumer-facing innovation downshifted to a lower gear. And that’s a good thing.
Getting Down to Work
“Mobile” news cooled because the competitive models have been established: platform/OS, bank-led, and merchant-based wallets. Now, it’s time for the marketplace to determine the outcome. While mobile wallets are arguably more convenient than EMV cards, the hard work of adding financial incentives like coupons, discounts, and other commerce-driving functions is still underway. Merchant-based apps have the edge here. We have a lot to watch over the next few years as these models mature and best practices emerge.
That’s not to say that this year’s Money20/20 was without announcements and discussions that will shape the industry.
FIDO Alliance and EMVCo Partnership
Building technology to secure payment card data while maintaining card system interoperability is the province of EMVCo. The organization continues to evolve its card data protection toolkit by expanding the use of dynamic data and card number tokenization. Great tools that help. A lot. But limiting access to accounts that control that card data is also necessary and that’s the domain of stronger authentication, code for “killing the password” through biometrics. So, it’s significant that EMVCo is now working with the FIDO Alliance on authentication in card payments.
FIDO, the organization dedicated to replacing the password model with open, interoperable, biometric-based authentication, will work on a standard method for mobile wallet providers and payment app developers in support of the Consumer Device Cardholder Verification Method (CDCVM). To optimize the user experience, they will work on biometric authentication flows that speed the transaction through “user verification caching.” The work will be included in the Web Authentication specification already under development by the Word Wide Web Consortium.
Faster Payments Heats Up
Glenbrook’s Elizabeth McQuerry led a panel, and the 300+ attendees, through the use and business cases for NACHA’s Same Day ACH service and The Clearing House’s real-time payments switch. In that roomful of payments insiders, the clear consensus was that the business case for these two systems will be made by B2B payments.
Card networks are vying heavily to be the rails for P2P payments as seen by their participation in the formal launch of Zelle, the consumer branding for Early Warning’s payments service formerly known as clearXchange. Visa Direct was a major focus at Money 2020. Stitching together the clearXchange switch with the “push to card” capabilities of Visa Direct and MasterCard Send, Zelle has the potential to blunt Venmo’s growth provided the user experience is excellent and branding is adequate. A whole lot of “viral” will be needed. Between the two, the cost of P2P payments incurred by participating financial institutions has gotten more reasonable but it’s still a cost. The push toward faster payments by banks in the U.S. now has three main camps – cards, Zelle, and The Clearing House.
Integrations and Partnerships
The cloud and apps have made it easier to assemble complementary capabilities and deliver them to where users can access them. PayPal’s reach into Facebook Messenger, announced on Monday, is an example. Messenger users can make purchases with their PayPal credentials and receive receipts and other messages via the Messenger interface. You go where the users are.
Other integrations of note include Android Pay’s support for Visa Checkout and Mastercard’s Masterpass. Integration enablements steps include Synchrony’s Plug-in that facilitates a retailer’s inclusion of e-gift cards into the retailer’s app.
Blockchain focused firms were at Money 20/20 but the most visible was Chain, the Visa-backed blockchain service developer that open sourced its blockchain creation and management code this week. Chain’s blockchain supports the creation of new asset classes and the issuance of those assets all on the same blockchain. Recording transactions within a one second window, Chain’s approach relies on both its code and the right behavior of its users to maintain trust. Business law and contracts, as well as regulation, will frame usage as much as the code. Chain’s own business model will include key management services based on host security modules, the HSM devices that manage PIN cryptography today.
In a nutshell, this year’s Money20/20 was about payments rails and their interconnections. Interconnections were also the theme for the Glenbrook team. With scores of meetings, it was great to catch up with so many clients and friends in our dynamic, fascinating industry. We look forward to seeing you there next year, if not much sooner!